As filed with the Securities and Exchange Commission on March 24, 2004
Registration No. 333-112673
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
FORM S-3/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CRYOLIFE, INC.
(Exact name of registrant as specified in its charter)
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FLORIDA 59-2417093
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
CRYOLIFE, INC.
1655 ROBERTS BOULEVARD, NW
KENNESAW, GEORGIA 30144
(770) 419-3355
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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COPIES TO:
STEVEN G. ANDERSON, PRESIDENT, CHIEF EXECUTIVE OFFICER T. CLARK FITZGERALD III, ESQ.
AND CHAIRMAN OF THE BOARD OF DIRECTORS ARNALL GOLDEN GREGORY LLP
CRYOLIFE, INC. 2800 ONE ATLANTIC CENTER
1655 ROBERTS BOULEVARD, NW 1201 WEST PEACHTREE STREET
KENNESAW, GEORGIA 30144 ATLANTA, GEORGIA 30309-3450
(770) 419-3355 (404) 873-8622
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Approximate Date of Commencement of Proposed Sale to the Public: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS INCOMPLETE AND MAY BE CHANGED. THE SELLING
SHAREHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 24, 2004
PROSPECTUS
3,444,000 SHARES
CRYOLIFE, INC.
COMMON STOCK
This prospectus relates to the potential offer and sale from time to time
of up to 3,444,000 shares of our common stock by the shareholders identified on
pages 17 - 18 of this prospectus or in any accompanying supplement to this
prospectus.
We will not receive any of the proceeds from the sale of shares of common
stock by the selling shareholders.
Our common stock is traded on The New York Stock Exchange under the symbol
"CRY." The last reported sale price of the common stock on March 23, 2004 was
$5.53 per share.
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THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is March ___, 2004.
TABLE OF CONTENTS
PAGE
SUMMARY.......................................................................1
SELECTED CONSOLIDATED FINANCIAL DATA..........................................4
RISK FACTORS..................................................................5
FORWARD LOOKING STATEMENTS...................................................17
USE OF PROCEEDS..............................................................18
SELLING SHAREHOLDERS.........................................................18
PLAN OF DISTRIBUTION.........................................................20
DESCRIPTION OF CAPITAL STOCK.................................................23
WHERE YOU CAN FIND MORE INFORMATION..........................................27
LEGAL MATTERS................................................................27
EXPERTS......................................................................28
i
SUMMARY
This summary highlights information that we believe is especially important
concerning our business and this offering of common stock. It does not contain
all of the information that may be important to your investment decision. You
should read the entire prospectus, including the documents incorporated herein
by reference, "Risk Factors" and our financial statements and related notes,
before deciding to invest in the common stock.
CryoLife preserves and distributes human tissues for cardiovascular,
vascular and orthopaedic transplant applications and develops and commercializes
medical devices which may be implanted into the body during surgery. The
implantable devices include BioGlue(R) Surgical Adhesive, porcine heart valves,
and grafts of bovine blood vessels processed using our proprietary SynerGraft(R)
technology.
CryoLife distributes preserved human cardiovascular, vascular and
orthopaedic tissue to implanting institutions throughout the United States,
Canada and Europe. We preserve human tissue using special freezing techniques,
or cryopreservation. Management believes the cryopreserved human tissues it
distributes offer specific advantages over mechanical, synthetic, and
animal-derived alternatives. Depending on the alternative, these advantages
include more natural blood flow properties for our cryopreserved heart valves,
the elimination of a long-term need for drug therapy to prevent excessive blood
clotting, a reduced incidence of reoperation, and a reduced risk of catastrophic
failure, thromboembolism (stroke), or calcification.
CryoLife's proprietary BioGlue Surgical Adhesive, designed for
cardiovascular, vascular, pulmonary, and general surgical applications, is a
polymer based on bovine blood clotting protein and an agent for linking together
proteins. CryoLife can distribute BioGlue throughout the United States and more
than 40 other countries for designated applications. In the U.S., BioGlue is FDA
approved as an adjunct to sutures and staples for use in adult patients in open
surgical repair of large vessels. In Europe, CryoLife distributes BioGlue under
CE Mark product certification for vascular applications, pulmonary indications,
such as the repair of air leaks in lungs, and soft tissue repair procedures.
CryoLife has also received approval and distributes BioGlue for vascular,
pulmonary and soft tissue repairs in Canada. Additional marketing approvals have
been granted for specified applications in Australia, and in several countries
in South America and Asia.
Through its continuing research and development activities, CryoLife
endeavors to use its expertise in biochemistry, cell biology, immunology, and
protein chemistry and its understanding of the cardiovascular, vascular, and
orthopaedic surgery medical specialties, to acquire and develop useful
implantable products and technologies. We seek to identify market areas that can
benefit from preserved living tissues and other related technologies, to develop
innovative techniques and products within these areas, to secure their
commercial protection, to establish their efficacy and then to market these
techniques and products. In order to expand CryoLife's service and product
offerings, we are in the process of developing or investigating several
technologies and products. The products in development have not been subject to
completed clinical trials, and have not received FDA or other regulatory
approval, so we are not certain if we will derive any revenues from them.
CryoLife generally performs significant research and development work before
offering its services and products, building on either existing non-proprietary
knowledge or acquired technology and know-how. Our tissue preservation services
were developed based on work done some years before. Our BioGlue product was
developed by us from a substance originally developed by a third party and
acquired by us. In addition we continue to explore technologies that may further
enhance the safety of our tissue processing.
In December 2003 we announced that CryoLife and Clearant are working
together to develop and validate a process to incorporate the use of the
Clearant technology in the processing of some of our orthopaedic tissue. Our
research and development strategy is to allocate available resources among
CryoLife's core market areas based on the size of the potential market for any
specific product candidate and the estimated development time and cost required
to bring the product to market.
CryoLife is using the technology underlying its BioGlue surgical adhesive
as the base for several potential products in development. Other potential
applications for BioGlue surgical adhesive in the U.S. include hernia repair and
sealing the membranes surrounding the brain and spinal cord. BioGlue also has
the potential to be used as a replacement for the soft tissue in spinal discs.
1
One of our subsidiaries is developing a new drug delivery technology that has
potential uses in the areas of cancer therapy, fibrinolysis (blood clot
dissolving), and other drug delivery applications.
CryoLife also distributes its SynerGraft processed bovine vascular graft
and a porcine heart valve, the CryoLife-O'Brien(R) aortic heart valve. The
SynerGraft process involves the depopulation of cells leaving a matrix of
protein fibers that has the potential to be repopulated with the recipient's
cells. CryoLife believes that this process increases graft longevity, and
improves the biocompatibility and functionality of the tissue. CryoLife markets
the SynerGraft vascular graft in Europe and the Middle East. CryoLife's porcine
valves contain minimal amounts of synthetic materials, compared to many other
fixed porcine heart valves. This decreases the risk of endocarditis, a
debilitating and potentially fatal infection. CryoLife currently markets this
valve in Europe and certain other territories outside the U.S.
CryoLife's business is subject to a number of risks, including the
possibility of further FDA actions, additional expenses and losses from product
recalls, possible losses from ongoing product liability, securities and
litigation, adverse publicity and lower demand for CryoLife products resulting
from product recalls and other FDA activity, inability to obtain sufficient
insurance coverage, possible inability to protect the intellectual property
rights in our technology, the possible inability to obtain necessary regulatory
approvals, and possible future lack of capital.
Food and Drug Administration (FDA) Activity.
In August 2002 the FDA issued an order, which we refer to as the FDA Order,
regarding several types of tissue processed by CryoLife. Non-valved cardiac,
vascular, and orthopaedic tissue processed by CryoLife from October 3, 2001 to
September 5, 2002 was required to be retained until recalled, destroyed, the
safety was confirmed, or an agreement was reached with the FDA for its proper
disposition under the supervision of an authorized official of the FDA. Pursuant
to the FDA Order, CryoLife placed non-valved cardiac, vascular, and orthopaedic
tissue subject to the FDA Order on quality assurance quarantine and recalled the
non-valved cardiac, vascular, and orthopaedic tissues subject to the FDA Order
(i.e. processed since October 3, 2001) that had been distributed but not
implanted. In addition, CryoLife ceased processing non-valved cardiac, vascular,
and orthopaedic tissues. In September 2002, CryoLife and the FDA reached an
agreement permitting CryoLife to immediately resume processing and limited
distribution of its life-saving non-valved cardiac and vascular tissues. The
Company made changes to its procedures, and now processes most of the tissues
that were subject to the FDA recall.
The FDA subsequently issued several notices on its Form 483, called Notices
of Observation, which set forth its observations as to documentation and
procedures that need to be addressed. The most recent Notice of Observations was
issued in February 2004.
During 2003, we received other notices from the FDA stating that the FDA
believed that cardiovascular tissue processed using CryoLife's SynerGraft
technology required additional premarket approval authorization and that the
tissues should be regulated as medical devices. CryoLife voluntarily suspended
the use of the SynerGraft technology in the processing of allograft
cardiovascular and vascular tissue. Additionally, CryoLife discontinued labeling
blood vessel grafts, referred to as vascular grafts, for use in arteriovenous
access. The FDA has not suggested that these tissues be recalled. Until such
time as the issues surrounding the SynerGraft treated tissues are resolved,
CryoLife will employ its traditional processing methods on these tissues.
Distribution of allograft heart valves and vascular tissue processed using
CryoLife's traditional processing protocols will continue. CryoLife currently
has nominal amounts of SynerGraft processed cardiovascular and vascular tissue
on hand.
Products Liability Litigation and Insurance Coverage.
As of March 3, 2004 we were aware of nine pending product liability
lawsuits. The lawsuits are currently in the pre-discovery or discovery stages.
Of these lawsuits, five allege product liability claims arising out of our
orthopaedic tissue services, three allege product liability claims arising out
of our allograft heart valve tissue services, and one alleges product liability
claims arising out of the non-tissue products made by Ideas for Medicine, when
it was a subsidiary of CryoLife.
2
Of the nine open products liability lawsuits, two lawsuits were in the
2000/2001 insurance policy year, one was filed in the 2001/2002 insurance policy
year, three were in the 2002/2003 insurance policy year and three were in the
2003/2004 insurance policy year. For the 2000/2001 and 2001/2002 insurance
policy years, CryoLife maintained claims-made insurance policies, which CryoLife
believes to be adequate to defend against the suits filed during this period. As
of December 31, 2003 CryoLife has an accrual of $100,000 for retention levels
related to the 2000/2001 and 2001/2002 policy years.
For the 2002/2003 insurance policy year, CryoLife maintained claims-made
insurance policies with three carriers. CryoLife used all of its insurance
coverage, aggregating $25 million, for the 2002/2003 insurance policy year, as
well as funds of its own, to resolve claims outstanding in the relevant policy
period. CryoLife will be required to fund any amounts needed to defend against
the remaining suits in the 2002/2003 insurance policy year. For the 2003/2004
insurance policy year, CryoLife maintains a first year claims-made insurance
policy. Only claims incurred and reported during the policy period April 1, 2003
through March 31, 2004 are covered by this policy. Of the three lawsuits in the
2003/2004 insurance policy year, one is covered by insurance and two are not.
CryoLife believes its 2003/2004 insurance policy to be adequate to defend
against the suit as to which coverage is available. Other product liability
claims have been asserted against CryoLife that have not resulted in lawsuits.
We are monitoring these claims.
CryoLife performed an analysis as of December 31, 2003 of the pending
uninsured product liability claims based on settlement negotiations to date and
advice from counsel. As of December 31, 2003 we had accrued a total of $5.5
million for uninsured product liability claims.
RECENT DEVELOPMENT
Recent Sale of Common Stock
On January 27, 2004, CryoLife closed on a $21.5 million private placement
of 3,444,000 shares of common stock. Net proceeds from the offering were
approximately $20.0 million. The proceeds from the sale of the common stock will
be used for general corporate purposes.
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CryoLife, Inc. was incorporated January 19, 1984 in Florida. All references
to "CryoLife," the "Company," "we," "us" or "our" in this prospectus mean
CryoLife, Inc., a Florida corporation, and all entities owned or controlled by
CryoLife, Inc., except where it is made clear that the term means only the
parent company.
Our principal executive offices are located at 1655 Roberts Boulevard, NW,
Kennesaw, Georgia 30144. Our telephone number is (770) 419-3355 and our Web site
is located at www.cryolife.com. Information contained in our Web site is not
part of this prospectus.
3
SELECTED CONSOLIDATED FINANCIAL DATA
The following Selected Consolidated Financial Data should be read in
conjunction with our Consolidated Financial Statements and Notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial information incorporated herein by reference.
The selected data presented below for and as of the end of the years ended
December 31, 2002 and 2003 are derived from our Consolidated Financial
Statements that were audited by Deloitte and Touche LLP, independent auditors,
and which are incorporated herein by reference. The selected data presented
below as of and for each of the years in the three-year period ended December
31, 2001, are derived from our Consolidated Financial Statements that were
audited by Arthur Andersen LLP, independent auditors. The historical results are
not necessarily indicative of future results of operations.
SELECTED FINANCIAL INFORMATION
(in thousands, except percentages and per share data)
YEAR ENDED
DECEMBER 31,
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OPERATIONS 2003 2002 2001 2000 1999
------------ -------------- ------------ ------------ -------------
Revenues $ 59,532 $ 77,795 $ 87,671 $ 77,096 $ 66,722
Net (loss)/income (32,394) (27,761) 9,166 7,817 4,451
Research and
development as a
percentage of
revenues 6.1% 5.9% 5.4% 6.8% 6.6%
(LOSS)/EARNINGS PER SHARE1
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2003 2002 2001 2000 1999
------------ -------------- ------------ ------------ -------------
Basic $ (1.64) $ (1.43) $ 0.49 $ 0.42 $ 0.24
Diluted $ (1.64) $ (1.43) $ 0.47 $ 0.41 $ 0.24
DECEMBER 31,
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2003 2002 2001 2000 1999
------------ -------------- ------------ ------------ -------------
Total assets $ 75,027 $ 106,414 $ 129,310 $ 112,009 $ 94,025
Working capital 14,790 39,385 66,668 69,063 59,597
Long Term Liabilities 5,716 4,552 10,071 12,192 6,177
Shareholder's equity 48,338 79,800 101,439 89,395 80,226
Current ratio 2 2:1 3:1 5:1 8:1 9:1
---------------
1 Reflects adjustment for 3-for-2 stock split effected December 27, 2000.
2 Current assets divided by current liabilities.
4
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before you make any investment
decisions with respect to our securities.
If any of the adverse events described in the following factors actually
occur, or if we do not accomplish those events or objectives described in the
risk factors as necessary to meet our expectations, our business, financial
condition and operating results could be materially and adversely affected, the
trading price of our common stock could decline and you could lose all or part
of your investment.
RISKS RELATING TO OUR BUSINESS
OVERVIEW
CryoLife has faced extraordinary challenges since 2002. It received, on
August 13, 2002, an FDA order calling for the retention, recall, and/or
destruction of all non-valved cardiac, vascular, and orthopaedic tissue
processed by CryoLife since October 3, 2001 (the "FDA Order"). The recall
resulted in the destruction of much of CryoLife's tissue, required that it
adjust revenue for tissue recall returns, curtailed its processing activities,
subjected it to intense FDA scrutiny and additional regulatory requirements that
increased cost while CryoLife suffered decreased revenues due to lack of
processing ability and decreased market demand for its services. During the same
year, CryoLife was the subject of intense adverse media attention in connection
with allegations that tissue processed by CryoLife had infected a man in
Minnesota and caused his death. CryoLife also became the subject of
shareholders' class action and derivative shareholder suits, both of which
remain pending. Products liability cases and claims increased to unprecedented
numbers for CryoLife, using all of its related 2002/2003 insurance policy year
insurance coverage and taxing its other resources. While many cases and claims
have been settled, several remain unresolved. Since 2002, a U.S. Senate
committee has inquired into safety in the tissue processing industry, making
inquiries of CryoLife. The SEC has initiated and continues to pursue a formal
investigation of CryoLife. The combined effect of these challenges has been to
reduce Company revenues, increase its costs to process tissues and its operating
expenses and strain management resources. Although CryoLife has now resumed
processing and distribution of the tissues subject to the FDA recall and
resolved many of the products liability suits pending against it, the foregoing
factors will continue to challenge CryoLife in its efforts to return to the
sales and profitability it enjoyed prior to 2002. No assurances can be made that
CryoLife will succeed in those efforts in the near future. These risks are
addressed in greater detail below and elsewhere in this prospectus.
THE AUGUST 2002 FDA ORDER ON HUMAN TISSUE AND SUBSEQUENT FDA ACTIVITY CONTINUE
TO ADVERSELY IMPACT CRYOLIFE'S BUSINESS, INCLUDING DEMAND FOR ITS SERVICES AND
PROCESSING COSTS
On August 13, 2002 CryoLife received an order from the FDA calling for the
retention, recall, and/or destruction of all non-valved cardiac, vascular, and
orthopaedic tissue processed by CryoLife at its headquarters since October 3,
2001 based upon allegations that CryoLife violated FDA regulations in its
handling of such tissue and alleged contamination through CryoLife's processing
of such tissue that resulted in 14 post-transplant infections including one
death. A significant portion of CryoLife's current revenues is derived from the
preservation of human tissues. Revenues from human tissue preservation services
for the six months ended June 30, 2002, the last period ending prior to the
issuance of the FDA Order, were 78% of CryoLife's revenues, or approximately
$37.8 million. During the fourth quarter of 2003, these revenues were
approximately $4.9 million or 39% of fourth quarter revenues.
The FDA Order, subsequent FDA activity and resulting adverse publicity have
had a material adverse effect on CryoLife's business, financial condition,
results of operations and cash flows. CryoLife has experienced decreases in
revenues and profits and there is a possibility that CryoLife may not generate
sufficient cash from operations to fund its operations over the long-term.
CryoLife has continued to experience a reduced demand for the types of
tissues subject to the FDA Order due to the adverse publicity generated from the
recall and from decisions by implanting physicians' or risk managers at
implanting institutions to use human tissue services provided by CryoLife's
competitors. In addition, as a result of the FDA Order, subsequent FDA activity,
and changes in CryoLife's processing, the costs of such processing have
increased and are likely to remain high as compared to cost levels prior to the
FDA Order. Although CryoLife expects them to decrease somewhat beginning in the
5
second quarter of 2004, these high costs could have a material adverse effect on
CryoLife's business, results of operations and financial position.
The success of CryoLife's tissue preservation services depends upon, among
other factors, the availability of sufficient quantities of tissue from human
donors. Any material reduction in the supply of donated human tissue could
restrict CryoLife's growth. CryoLife relies primarily upon the efforts of third
party procurement agencies and tissue banks (most of which are not-for-profit)
and others to educate the public and foster a willingness to donate tissue.
Because of the adverse publicity associated with the FDA Order and subsequent
FDA activity and uncertainty regarding future tissue processing, some
procurement agencies stopped sending tissue to CryoLife for processing. If
CryoLife's relationships with procurement agencies continue to be adversely
affected or CryoLife is unable to obtain tissues from procurement agencies that
have ceased sending tissue to CryoLife for processing, CryoLife may be unable to
obtain adequate supplies of donated tissues to operate profitably.
THE FDA ORDER AND SUBSEQUENT ACTIVITY HAVE HAD AND CONTINUE TO HAVE AN ADVERSE
IMPACT ON LIQUIDITY AND CAPITAL RESOURCES
Based upon the lower levels of revenues and profits since the FDA Order,
FDA activity, and associated adverse publicity, CryoLife expects that its cash
and cash equivalents will continue to decrease over the near term and working
capital could decrease from levels now on hand. As a result of the FDA Order
CryoLife recorded a reduction to pretax income of $12.6 million in the quarter
ended June 30, 2002. The reduction was comprised of a net $8.9 million increase
to cost of human tissue preservation services, a $2.4 million reduction to
revenues (and accounts receivable) for the estimated return of the tissues
subject to recall by the FDA Order, and a $1.3 million accrual recorded in
general, administrative, and marketing expenses consisting of an accrual for
retention levels under CryoLife's product liability and directors' and officers'
insurance policies of $1.2 million and for estimated expenses for packaging and
handling for the return of affected tissues under the FDA Order of $75,000. The
net increase of $8.9 million to cost of preservation services was comprised of a
$10.0 million write-down of deferred preservation costs for tissues subject to
the FDA Order, offset by a $1.1 million decrease in cost of preservation
services due to the estimated tissue returns resulting from the FDA Order (the
costs of such recalled tissue are included in the $10.0 million write-down).
In the quarter ended September 30, 2002 CryoLife recorded a reduction to
pretax income of $24.6 million as a result of the FDA Order. The reduction was
comprised of a net $22.2 million increase to cost of human tissue preservation
services, a $1.4 million write-down of goodwill, and a $1.0 million reduction to
revenues (and accounts receivable) for the estimated return of the tissues
shipped during the third quarter subject to recall by the FDA Order. The net
$22.2 million increase to cost of preservation services was comprised of a $22.7
million write-down of deferred preservation costs, offset by a $535,000 decrease
in cost of preservation services due to the estimated and actual tissue returns
resulting from the FDA Order (the costs of such recalled tissue are included in
the $22.7 million write-down).
In the quarter ended March 31, 2003 CryoLife recorded a favorable
adjustment of $848,000 to the estimated tissue recall returns due to lower
actual tissue returns under the FDA Order than were originally estimated in
2002. The adjustment increased cardiac tissue revenues by $92,000, vascular
tissue revenues by $711,000, and orthopaedic tissue revenues by $45,000 in the
first quarter of 2003. In the quarter ended September 30, 2003 CryoLife recorded
a favorable adjustment of $52,000 to reverse the remaining unused portion of the
estimated tissue recall returns due to lower overall actual tissue returns under
the FDA Order than were estimated. Although vascular and orthopaedic returns
were lower than expected, cardiac returns were higher than expected. Therefore,
the $52,000 adjustment decreased cardiac tissue revenues by $7,000 and increased
vascular tissue revenues by $41,000 and orthopaedic tissue revenues by $18,000
in the third quarter of 2003. We determined that no additional accruals were
necessary for tissue returns under the FDA Order. Therefore, as of December 31,
2003 there was no accrual for estimated return of tissues subject to recall by
the FDA Order.
Although CryoLife has reduced its level of operations and the number of
personnel, there is a possibility that CryoLife may not have sufficient funds to
fund its primary capital requirements or to meet its operating and development
needs in the long-term.
6
REVENUE FROM ORTHOPAEDIC TISSUE PRESERVATION SERVICES IS MINIMAL AND MAY NOT
RETURN
We have received only nominal revenue from the preservation of orthopaedic
tissue since August 14, 2002. For the year ended December 31, 2001, human tissue
preservation services revenues for orthopaedic tissue were $22.5 million, which
represented 26% of CryoLife's revenues. For the six months ended June 30, 2002,
(the last period ending prior to the FDA Order) revenues for preservation
services for orthopaedic tissue were $11.5 million which represented 24% of
CryoLife's revenues. For the year ended December 31, 2003, revenues for
preservation services for orthopaedic tissue were $1.1 million, which
represented 2% of CryoLife's revenues. The demand for orthopaedic tissue from
CryoLife may remain minimal and may never return to the levels in existence
before the FDA Order, even though CryoLife has resumed processing. As a result,
this portion of CryoLife's business may have to be permanently discontinued or
may only continue at substantially reduced levels. Any of these occurrences
would result in a continued significant decrease in CryoLife's preservation
services revenues and profitability in the future as compared to prior to the
FDA Order.
PHYSICIANS MAY BE RELUCTANT TO IMPLANT CRYOLIFE'S PRESERVED TISSUES
There is a risk that physicians or implanting institutions will be
reluctant to choose CryoLife's preserved tissues for use in implantation, due to
a perception that they may not be safe or to a belief that the implanting
physician or hospital may be subject to a heightened liability risk if
CryoLife's tissues are used. In addition, for similar reasons, hospital risk
managers may forbid implanting surgeons to utilize CryoLife's tissues where
alternatives are available. Several risk managers and physicians have refused to
use our products due to these concerns. If additional implanting hospitals or
physicians representing significant revenues refuse to use tissues preserved by
us, and we are unable to replace the revenues lost, our preservation services
revenues and profits would be materially adversely affected.
PRODUCTS AND SERVICES NOT INCLUDED IN THE FDA RECALL MAY COME UNDER INCREASED
SCRUTINY
Although CryoLife's heart valve processing services, BioGlue Surgical
Adhesive and bioprosthetic devices were not included in the FDA recall, the
processing and manufacturing facilities for these products may come under
increased scrutiny from the FDA. A negative review from the FDA of these
processing and manufacturing facilities could have a material adverse effect on
CryoLife's business, results of operations and financial position. As of the
date of this prospectus, we have not received any correspondence or
conversations from the FDA suggesting higher scrutiny.
DEMAND FOR HEART VALVES PROCESSED BY CRYOLIFE HAS DECREASED AND MAY CONTINUE TO
DECREASE
Some physicians and implanting institutions have remained reluctant to
choose CryoLife's allograft heart valves for use in implantation, perhaps due to
a perception that they may not be safe or to a belief that the implanting
institutions or hospitals may be subject to a heightened liability risk if
CryoLife's preserved tissues are used, especially if alternatives are available.
Demand for CryoLife's allograft heart valves could decrease. In such an event,
CryoLife's preservation services revenues and profits would be materially
adversely affected.
ADVERSE PUBLICITY MAY REDUCE DEMAND FOR PRODUCTS AND SERVICES NOT AFFECTED BY
THE FDA RECALL
Even though CryoLife's BioGlue, porcine heart valves and bovine vascular
grafts (of which the porcine and bovine products are not sold in the U.S.) were
not included in the FDA Order, there is a possibility that surgeons or risk
managers at institutions that use such products may be reluctant to use such
products because of the adverse publicity associated with the FDA Order.
Decreased demand for such products, particularly BioGlue, could have a material
adverse effect on CryoLife's business, results of operations and financial
position.
WE MAY BE UNABLE TO ADDRESS THE CONCERNS RAISED BY THE FDA IN ITS FORM 483
NOTICES OF OBSERVATIONS
The FDA issued new Form 483 Notices of Observations in February and October
2003, and another in February 2004. If CryoLife's responses to the FDA's
observations contained in these notices are deemed unsatisfactory, the FDA could
take further action, which could have a material adverse effect on the Company's
business, results of operations, financial position or cashflows. Further action
by the FDA could include additional recalls of products, requiring us to do
7
additional testing, beginning to require prescriptions for products where they
are not currently required, halting the shipping or processing of products, or
requiring additional approvals for marketing our products or services.
THE FDA HAS NOTIFIED CRYOLIFE OF ITS BELIEF THAT MARKETING OF CRYOVALVE SG AND
CRYOVEIN SG REQUIRE ADDITIONAL REGULATORY SUBMISSIONS AND/OR APPROVALS
On February 20, 2003 CryoLife received a letter from the FDA stating that a
510(k) premarket notification for the CryoValve SG was required before the
product can be marketed. The letter also contended that a premarket approval
application was required in order to market the CryoVein SG when used for A-V
(arteriovenous) access. The agency's position is that femoral veins used for A-V
access are medical devices that require premarket approval. CryoLife submitted a
510(k) premarket notification for the CryoValve SG, and received a response
requesting additional information. There can be no assurance as to when
clearance will be obtained, if at all.
REGULATORY ACTION OUTSIDE OF THE U.S. MAY ALSO AFFECT CRYOLIFE'S BUSINESS
After the issuance of the FDA Order, Health Canada also issued a recall on
the same types of tissue. In addition, other countries have inquired as to the
tissues exported by the Company, although these inquiries are now, to CryoLife's
knowledge, complete. In the event additional regulatory concerns are raised by
other countries, CryoLife may be unable to export tissues to those countries.
Revenue from international human tissue preservation services was $721,000 for
the year ended December 31, 2003.
CRYOLIFE IS THE SUBJECT OF AN ONGOING SEC INVESTIGATION
CryoLife is the subject of an ongoing SEC investigation. An adverse finding
by the SEC could have a material adverse effect on CryoLife's business,
financial position, results of operations, and cash flows. At the present time,
CryoLife is unable to predict the outcome of this matter.
CRYOLIFE'S INSURANCE COVERAGE MAY BE INSUFFICIENT
Product Liability Claims
In the normal course of business as a medical device and services company,
CryoLife has product liability complaints filed against it. Following the FDA
Order, products liability lawsuits increased to unprecedented numbers for
CryoLife. CryoLife maintains claims-made insurance policies to mitigate its
financial exposure to product liability claims. Claims-made insurance policies
generally cover only those asserted claims and incidents that are reported to
the insurance carrier while the policy is in effect. Thus, a claims-made policy
does not generally represent a transfer of risk for claims and incidents that
have been incurred but not reported to the insurance carrier during the policy
period.
For the 2000/2001 and 2001/2002 insurance policy years, CryoLife maintained
claims-made insurance policies, which CryoLife believes to be adequate to defend
against the suits filed during this period. For the 2002/2003 insurance policy
year, CryoLife maintained claims-made insurance policies with three carriers.
CryoLife used all of its insurance coverage, aggregating $25.0 million, for the
2002/2003 insurance policy year, as well as funds of its own, to resolve claims
outstanding in the relevant policy period. CryoLife continues to attempt to
reach settlements of the remaining litigation. CryoLife recorded a liability on
its December 31, 2003, consolidated balance sheet and a corresponding expense
for the estimated cost of resolving these claims and reflecting the uninsured
portion of the estimated liability. The amounts recorded were estimates, and do
not reflect actual settlement arrangements or final judgments, the latter of
which could include punitive damages, nor do they represent cash set aside for
the purpose of making payments. CryoLife's product liability insurance policies
do not include coverage for any punitive damages. If CryoLife is unsuccessful in
arranging acceptable settlements of product liability claims, there may not be
sufficient insurance coverage and liquid assets to meet these obligations.
Additionally, if one or more of the product liability claims in which CryoLife
is a defendant should be tried with a substantial verdict rendered in favor of
the plaintiff(s), such verdict(s) could exceed CryoLife's available insurance
coverage and liquid assets. If CryoLife is unable to meet required future cash
payments to resolve the outstanding product liability claims, it will have a
material adverse effect on the financial position, results of operations, and
cash flows of CryoLife.
8
Class Action Lawsuit
Several putative class action lawsuits were filed in July through September
2002 against CryoLife and certain officers of CryoLife, alleging violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on a
series of purportedly materially false and misleading statements to the market.
The suits were consolidated, and a consolidated amended complaint filed, which
principally alleges that CryoLife made misrepresentations and omissions relating
to product safety and CryoLife's alleged lack of compliance with certain FDA
regulations regarding the handling and processing of certain tissues and other
product safety matters. The consolidated complaint seeks certification of a
class of purchasers between April 2, 2001 and August 14, 2002, compensatory
damages, and other expenses of litigation. CryoLife and the other defendants
filed a motion to dismiss the consolidated complaint on February 28, 2003, which
motion the United States District Court for the Northern District of Georgia
denied in part and granted in part on May 27, 2003. The discovery phase of the
case commenced on July 16, 2003. On December 16, 2003, the Court certified a
class of individuals and entities who purchased or otherwise acquired CryoLife
stock from April 2, 2001 through August 14, 2002. At present, the case remains
in the discovery phase. The Company carries directors' and officers' liability
insurance policies, which CryoLife presently believes to be adequate to defend
against this action. However, the directors' and officers' liability insurance
carriers have issued reservation of rights letters reserving their rights to
deny or rescind coverage under the policies. An adverse judgment in excess of
CryoLife's insurance coverage could have a material adverse effect on CryoLife's
financial position, results of operations, and cash flows.
Shareholder Derivative Action
On August 30, 2002 a purported shareholder derivative action was filed by
Rosemary Lichtenberger against Steven G. Anderson, Albert E. Heacox, John W.
Cook, Ronald C. Elkins, Virginia C. Lacy, Ronald D. McCall, Alexander C.
Schwartz, and Bruce J. Van Dyne in the Superior Court of Gwinnett County,
Georgia. The suit, which names CryoLife as a nominal defendant, alleges that the
individual defendants breached their fiduciary duties to CryoLife by causing or
allowing CryoLife to engage in certain inappropriate practices that caused
CryoLife to suffer damages. The complaint was preceded by one day by a letter
written on behalf of Ms. Lichtenberger demanding that CryoLife's Board of
Directors take certain actions in response to her allegations. On January 16,
2003 another purported derivative suit alleging claims similar to those of the
Lichtenberger suit was filed in the Superior Court of Fulton County by
complainant Robert F. Frailey. As in the Lichtenberger suit, the filing of the
complaint in the Frailey action was preceded by a demand letter sent on
Frailey's behalf to CryoLife's Board of Directors. Both complaints seek
undisclosed damages, costs and attorney's fees, punitive damages, and
prejudgment interest against the individual defendants derivatively on behalf of
CryoLife. As previously disclosed, CryoLife's Board of Directors established an
independent committee to investigate the allegations of Ms. Lichtenberger and
Mr. Frailey. The independent committee engaged independent legal counsel to
assist in the investigation, which culminated in a report by the committee
concluding that no officer or director breached any fiduciary duty. In October
2003 the two derivative suits were consolidated into one action in the Superior
Court of Fulton County, and a consolidated amended complaint was filed. The
independent committee, along with its independent legal counsel, evaluated the
consolidated amended complaint, and concluded that its prior report and
determination addressed the material allegations contained in the consolidated
amended complaint. The committee reiterated its previous conclusions and
determinations, including that maintaining the derivative litigation is not in
the best interests of the Company. An adverse decision in the case could have a
material adverse effect on CryoLife. Although the derivative suit is brought
nominally on behalf of the Company, the Company expects to continue to incur
defense costs and indemnification expenses in connection with the derivative
litigation.
INSURANCE COVERAGE MAY BE DIFFICULT OR IMPOSSIBLE TO OBTAIN IN THE FUTURE AND IF
OBTAINED, THE COST OF INSURANCE COVERAGE IS LIKELY TO BE MUCH MORE EXPENSIVE
THAN IN THE PAST
Due in part to the current litigation, the FDA Order and subsequent FDA
activity, CryoLife may be unable to obtain satisfactory insurance coverage in
the future, causing CryoLife to be subject to additional future exposure from
product liability claims. Additionally, if insurance coverage is obtained, the
insurance rates may be significantly higher than in the past, and may provide
less coverage, which may adversely impact CryoLife's profitability. For example,
9
CryoLife paid a higher fee for its 2003/2004 policy year products liability
insurance coverage, which also had a higher retention level and a lower overall
limit. Unlike the prior year's policy, the 2003/2004 policy did not cover any
claims which arose prior to the insurance policy year.
INTENSE COMPETITION MAY AFFECT CRYOLIFE'S ABILITY TO RECOVER FROM THE FDA ORDER
CryoLife faces competition from other companies that cryopreserve human
tissue, as well as companies that market mechanical valves and synthetic and
animal tissue for implantation and companies that market wound closure products.
Management believes that at least four tissue banks offer preservation services
for allograft heart valves and many companies offer processed porcine heart
valves and mechanical heart valves. A few companies dominate portions of the
mechanical, porcine and bovine heart valve markets, including St. Jude Medical,
Inc., Medtronic, Inc. and Edwards Life Sciences. CryoLife is aware that a few
companies have surgical adhesive products under development. Competitive
products may also be under development by other large medical device,
pharmaceutical and biopharmaceutical companies. Many of CryoLife's competitors
have greater financial, technical, manufacturing and marketing resources than
CryoLife and are well established in their markets.
We believe that our cryopreserved tissues compete favorably with other
entities that cryopreserve human tissue on the basis of technology, customer
service, and quality assurance. As a result of the decrease in CryoLife's
procurement and processing of human tissue, the decrease in cardiovascular,
vascular, and orthopaedic tissue shipments, and the lack of orthopaedic tissue
shipments for a period of time, our competitors have been favorably impacted and
CryoLife believes it has lost some market share since the FDA Order in 2002.
This interruption in our services may make it difficult for CryoLife to regain
the level of revenues reported prior to the FDA Order. As compared to
mechanical, porcine, and bovine heart valves, we believe that the human heart
valves cryopreserved by CryoLife compete on the factors set forth above, as well
as by providing a tissue that is the preferred replacement alternative with
respect to certain medical conditions, such as pediatric cardiac reconstruction,
valve replacements for women in their child-bearing years, and valve
replacements for patients with endocarditis. Although human tissue cryopreserved
by CryoLife is initially higher priced than mechanical alternatives, these
alternatives typically require that the patient take anti-coagulation drug
therapy for the lifetime of the implant. As a result of the costs associated
with anti-coagulants, mechanical valves are generally, over the life of the
implant, more expensive than tissue cryopreserved by CryoLife. However,
management believes that, to date, price has not been a significant competitive
factor.
CryoLife's BioGlue product will compete with other surgical adhesives and
surgical sealants, including Baxter Healthcare's Tiseel, FloSeal and CoSeal
products. Competitive products may also be under development by other large
medical device, pharmaceutical, and biopharmaceutical companies, including 3M
and Johnson & Johnson. CryoLife believes its BioGlue product competes favorably
because of its inherent sealing capabilities, high tensile strength and ease of
use.
There can be no assurance that CryoLife's products and services will be
able to compete successfully with the products of these or other companies. Any
products developed by CryoLife that gain regulatory clearance or approval would
have to compete for market acceptance and market share. Failure of CryoLife to
compete effectively could have a material adverse effect on CryoLife's business,
financial condition, results of operations and cash flows. The FDA Order and
related adverse publicity had an adverse effect on CryoLife's competitive
position, which had a material adverse effect on CryoLife's results of
operations. The FDA Order and subsequent FDA activity may continue to have an
adverse effect on CryoLife's competitive position, which may continue to have a
material adverse effect on CryoLife's results of operations. As a result,
CryoLife's competitors may gain competitive advantages that may be difficult to
overcome.
CRYOLIFE MAY NOT BE SUCCESSFUL IN OBTAINING NECESSARY CLINICAL RESULTS AND
REGULATORY APPROVALS FOR PRODUCTS AND SERVICES IN DEVELOPMENT, AND SUCH PRODUCTS
AND SERVICES MAY NOT ACHIEVE MARKET ACCEPTANCE
CryoLife's growth and profitability will depend, in part, upon its ability
to complete development of and successfully introduce new products, including
new applications of its BioGlue and applications applying its SynerGraft
technology. Developing new products and services to a commercially acceptable
form is uncertain, and obtaining required regulatory approval is time consuming
and costly.
10
Although CryoLife has conducted pre-clinical studies on many of its
products under development which indicate that such products may be effective in
a particular application, there can be no assurance that the results obtained
from expanded clinical studies will be consistent with earlier trial results or
be sufficient for CryoLife to obtain any required regulatory approvals or
clearances. There can be no assurance that CryoLife will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of new products, that regulatory clearance or
approval of these or any new products will be granted on a timely basis, if
ever, or that the new products will adequately meet the requirements of the
applicable market or achieve market acceptance.
The completion of the development of any of CryoLife's products remains
subject to all of the risks associated with the commercialization of new
products based on innovative technologies, including unanticipated technical or
other problems, manufacturing difficulties and the possible insufficiency of the
funds allocated for the completion of such development. Consequently, CryoLife's
products under development may not be successfully developed or manufactured or,
if developed and manufactured, such products may not meet price or performance
objectives, be developed on a timely basis or prove to be as effective as
competing products.
The inability to successfully complete the development of a product or
application, or a determination by CryoLife, for financial, technical or other
reasons, not to complete development of any product or application, particularly
in instances in which CryoLife has made significant capital expenditures, could
have a material adverse effect on CryoLife's business, financial condition,
results of operations, and cash flows. CryoLife's research and development
efforts are time consuming and expensive and there can be no assurance that
these efforts will lead to commercially successful products or services. Even
the successful commercialization of a new service or product in the medical
industry can be characterized by slow growth and high costs associated with
marketing, under-utilized production capacity and continuing research and
development and education costs. The introduction of new human tissue services
or products may require significant physician training and years of clinical
evidence derived from follow-up studies on human implant recipients in order to
gain acceptance in the medical community.
INVESTMENTS IN NEW TECHNOLOGIES OR DISTRIBUTION RIGHTS MAY NOT BE SUCCESSFUL
CryoLife may invest in new technology licenses or distribution rights that
may not succeed in the marketplace. In such cases, CryoLife may be unable to
recover its initial investment in the license, distribution right or purchase of
initial inventory, which may adversely impact CryoLife's profitability.
FUNDING FOR THE ACT TECHNOLOGY MAY NOT BE AVAILABLE
The ACT (Activation Control Technology) is a reversible linker technology
that has potential uses in the areas of cancer therapy, fibrinolysis (blood clot
dissolving) and other drug delivery applications. The reversible linker
technology joins a drug to another molecule. This link can be reversed by normal
hydrolysis or the application of an energy source. If the molecule to which the
drug is linked concentrates at the site of a tumor, or if an energy source is
applied at that site, then a drug can be concentrated at the site of a tumor and
the link reversed. By concentrating active drug at the site rather than
throughout the body there could be a greater opportunity to kill the tumor and
minimize harm to the patient. In February 2001 CryoLife formed AuraZyme, a
wholly-owned subsidiary, in order to seek a corporate collaboration or to
complete a potential private placement of equity or equity-oriented securities
to fund the commercial development of the ACT. CryoLife has been seeking such
funding since 1998. This strategy is designed to allow CryoLife to continue
development of this technology without incurring additional research and
development expenditures, other than through AuraZyme. There can be no guarantee
that such funding can be obtained on acceptable terms, if at all, especially in
light of the recent FDA Order. If such funding is not obtained, CryoLife may be
unable to effectively test and develop the ACT, and may therefore be unable to
determine its effectiveness. Even if such financing is obtained, there is no
guarantee that the ACT will in fact prove to be effective in the above
applications. In addition, any new financing may cause dilution to the ownership
interests of current CryoLife shareholders, or may include restrictive covenants
that could adversely affect CryoLife or its business.
SYNERGRAFT-TREATED TISSUES MAY NOT DEMONSTRATE BENEFITS SUFFICIENT TO JUSTIFY
THE PRICE
CryoLife processes bovine tissues with the SynerGraft technology and
processed human tissues with that technology until February 2003, following the
receipt of the informal FDA letter. The process involves antigen reduction,
11
which is the depopulation of the cells of the tissue to be implanted, leaving a
matrix of protein fibers that has the potential to be repopulated with the
recipient's cells. If successful, we believe that such repopulation increases
graft longevity and improves the biocompatibility and functionality of such
tissue, such that the implanted tissue behaves similar to the recipient's own
tissue. In animal studies, explanted SynerGraft treated allograft heart valves
have been shown to repopulate with the hosts' cells. However, should such
tissues implanted in humans not consistently and adequately repopulate with the
human host cells, the higher priced SynerGraft-treated tissues may not
demonstrate benefits over the CryoLife standard processing technology. This
could have a material adverse effect on future expansion plans and could limit
future growth.
CRYOLIFE IS DEPENDENT ON ITS KEY PERSONNEL
CryoLife's business and future operating results depend in significant part
upon the continued contributions of its key technical personnel and senior
management, many of who would be difficult to replace. CryoLife's business and
future operating results also depend in significant part upon its ability to
attract and retain qualified management, processing, technical, marketing, sales
and support personnel for its operations. Competition for such personnel is
intense and there can be no assurance that CryoLife will be successful in
attracting and retaining such personnel. CryoLife's key employers include its
management team, consisting of Steven G. Anderson, President, Chief Executive
Officer, and Chairman; Sidney B. Ashmore, Vice President, Marketing; Kirby S.
Black, PhD, Senior Vice President, Research and Development; David M. Fronk,
Vice President, Clinical Research; Albert E. Heacox, PhD, Senior Vice President,
Laboratory Operations; D. Ashley Lee, CPA, Vice President, Finance, Chief
Financial Officer, and Treasurer; Thomas J. Lynch, JD, PhD, Vice President,
Regulatory Affairs and Quality Assurance; and James C. Vander Wyk, PhD, Vice
President, Product Integrity. CryoLife has employment agreements with these key
personnel. Mr. Anderson's employment agreement contains a provision providing an
evergreen two year term, and provides for payment of $900,000 if his employment
is terminated other than for cause, death, disability or by him for good reason.
The others expire in September 2004, August 2005 or September 2005, and provide
for payments ranging from $240,000 to $360,000 if employment is terminated other
than for cause, death, disability or by the employee for good reason. Mr.
Lynch's agreement also provides for an automatic one year extension to August 1,
2006 unless notice is given 30 days prior to August 1, 2004. Other than a $1.5
million life insurance policy on Mr. Anderson, CryoLife does not have key life
insurance on these individuals. The loss of key employees, the failure of any
key employee to perform adequately or CryoLife's inability to attract and retain
skilled employees as needed could have a material adverse effect on CryoLife's
business, financial condition, results of operations and cash flows.
OUR CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31,
2001 AND INCLUDED IN CRYOLIFE'S 10-K WERE AUDITED BY ARTHUR ANDERSEN LLP, WHICH
HAS BEEN FOUND GUILTY OF OBSTRUCTION OF JUSTICE AND THE SUBJECT OF ADDITIONAL
LITIGATION
Arthur Andersen LLP has been found guilty of obstruction of justice with
respect to its activities in connection with Enron Corp. and may be the subject
of additional litigation. Arthur Andersen LLP has also ceased practicing before
the SEC. Arthur Andersen LLP or any successor in interest may have insufficient
assets to satisfy any claims that may be made by investors with respect to the
financial statements as of and for the year ending December 31, 2001 included in
CryoLife's Form 10-K for the year ending December 31, 2003 and incorporated into
this prospectus.
In addition, Arthur Andersen LLP has not consented to the inclusion of
their report dated March 27, 2002 in CryoLife's Form 10-K for the year ending
December 31, 2003, and as a result, only a copy of such report has been
included. Because Arthur Andersen LLP has not consented to the inclusion of
their report in our Form 10-K for the year ending December 31, 2003 which is
incorporated into this prospectus, claimants may not be able to recover against
Arthur Andersen LLP for any untrue statements of a material fact contained in
the financial statements audited by Arthur Andersen LLP or any omissions to
state a material fact required to be stated therein.
12
RISKS RELATED TO CRYOLIFE AND OUR INDUSTRY
EXTENSIVE GOVERNMENT REGULATION MAY ADVERSELY AFFECT THE ABILITY TO DEVELOP AND
SELL PRODUCTS AND SERVICES
Government regulation in the U.S., the EEA and other jurisdictions can
determine the success of CryoLife's efforts to market and develop its services
and products and those of its competitors. Allograft heart valves such as those
processed by CryoLife are currently regulated as Class II medical devices by the
FDA and are subject to significant regulatory requirements, including Quality
System Regulations and record keeping requirements. Changes in regulatory
treatment or the adoption of new statutory or regulatory requirements are likely
to occur, which could adversely impact the marketing or development of these
products or could adversely affect market demand for these products. Other
allograft tissues processed and distributed by CryoLife are currently regulated
as "human tissue" under rules promulgated by the FDA pursuant to the Public
Health Services Act. These rules establish requirements for donor testing and
screening of human tissue and record keeping relating to these activities and
impose certain registration and product listing requirements on establishments
that process or distribute human tissue or cellular-based products. The FDA has
proposed and is refining a regulation that will implement good tissue practices,
akin to good manufacturing practices, followed by tissue banks and processors of
human tissue. It is anticipated that these good tissue practices regulations
when promulgated will enhance regulatory oversight of CryoLife and other
processors of human tissue. See "Risk Factor - The FDA Has Notified CryoLife of
Its Belief that Marketing of CryoValve SG and CryoVein SG Require Additional
Regulatory Submissions and/or Approvals."
BioGlue Surgical Adhesive is regulated as a Class III medical device and
CryoLife believes that its ACT may be regulated as a biologic or drug by the
FDA. The ACT has not been approved for commercial distribution in the U.S. or
elsewhere. Fixed porcine heart valve products are classified as Class III
medical devices. CryoLife may not obtain the FDA approval required to distribute
its porcine heart valve products in the U.S. Distribution of these products
within the EC is dependent upon CryoLife maintaining its CE Mark ISO 9001, and
ISO 13485 certifications, of which there can be no assurance.
Most of CryoLife's products and services in development and those of
CryoLife's competitors if successfully developed, will require regulatory
approvals from the FDA and perhaps other regulatory authorities before they may
be commercially distributed. The process of obtaining required regulatory
approvals from the FDA normally involves clinical trials and the preparation of
an extensive premarket approval ("PMA") application and often takes many years.
The process is expensive and can vary significantly based on the type,
complexity and novelty of the product. There can be no assurance that any
products developed by CryoLife or its competitors, independently or in
collaboration with others, will receive the required approvals for manufacturing
and marketing.
Delays in obtaining U.S. or foreign approvals could result in substantial
additional cost and adversely affect a company's competitive position. The FDA
may also place conditions on product approvals that could restrict commercial
applications of such products. Product marketing approvals or clearances may be
withdrawn if compliance with regulatory standards is not maintained or if
problems occur following initial marketing. Delays imposed by the governmental
clearance process may materially reduce the period during which a company such
as CryoLife has the exclusive right to commercialize patented products.
Also, delays or rejections may be encountered during any stage of the
regulatory approval process based upon the failure of the clinical or other data
to demonstrate compliance with, or upon the failure of the product to meet, the
regulatory agency's requirements for safety, efficacy and quality, and those
requirements may become more stringent due to changes in applicable law,
regulatory agency policy or the adoption of new regulations. Clinical trials may
also be delayed due to unanticipated side effects, inability to locate, recruit
and qualify sufficient numbers of patients, lack of funding, the inability to
locate or recruit clinical investigators, the redesign of clinical trial
programs, the inability to manufacture or acquire sufficient quantities of the
particular product or any other components required for clinical trials, changes
in development focus and disclosure of trial results by competitors.
Even if regulatory approval is obtained for any products or services
offered by CryoLife or one of its competitors, the scope of the approval may
significantly limit the indicated usage for which such products or services may
be marketed. Products or services marketed pursuant to FDA or foreign oversight
or approvals are subject to continuing regulation. In the U.S., devices and
biologics must be manufactured in registered establishments (and, in the case of
biologics, licensed establishments) and must be produced in accordance with
13
Quality System Regulations. Manufacturing facilities and processes are subject
to periodic FDA inspection. Labeling and promotional activities are also subject
to scrutiny by the FDA and, in certain instances, by the Federal Trade
Commission. The export of devices and biologics is also subject to regulation
and may require FDA approval. From time to time, the FDA may modify such
regulations, imposing additional or different requirements. Failure to comply
with applicable FDA requirements, which may be ambiguous, could result in civil
and criminal enforcement actions, warnings, citations, product recalls or
detentions and other penalties and could have a material adverse effect on
CryoLife's business, financial condition, results of operations, and cash flows.
As noted above, the FDA Order and subsequent FDA activity had, and may continue
to have such an effect.
In addition, The National Organ Transplant Act ("NOTA") prohibits the
acquisition or transfer of human organs for "valuable consideration" for use in
human transplantation. NOTA permits the payment of reasonable expenses
associated with the removal, transportation, processing, preservation, quality
control and storage of human organs. There can be no assurance that restrictive
interpretations of NOTA will not be adopted in the future that will challenge
one or more aspects of industry methods of charging for preservation services.
Laboratory operations of CryoLife and its competitors are subject to the U.S.
Department of Labor, Occupational Safety and Health Administration and
Environmental Protection Agency requirements for prevention of occupational
exposure to infectious agents and hazardous chemicals and protection of the
environment. Some states have enacted statutes and regulations governing the
processing, transportation and storage of human organs and tissue.
More restrictive state laws or regulations may be adopted in the future and
they could have a material adverse effect on CryoLife's business, financial
condition, results of operations and cash flows.
UNCERTAINTIES RELATED TO PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY MAY
ADVERSELY AFFECT THE VALUE OF INTELLECTUAL PROPERTY
CryoLife owns several patents, patent applications and licenses relating to
its technologies, which it believes provide important competitive advantages.
There can be no assurance that CryoLife's pending patent applications will issue
as patents or that challenges will not be instituted concerning the validity or
enforceability of any patent owned by CryoLife, or, if instituted, that such
challenges will not be successful. The cost of litigation to uphold the validity
and prevent infringement of a patent could be substantial. Furthermore, there
can be no assurance that competitors will not independently develop similar
technologies or duplicate CryoLife's technologies or design around the patented
aspects of CryoLife's technologies. There can be no assurance that CryoLife's
proposed technologies will not infringe patents or other rights owned by others.
In addition, under certain of CryoLife's license agreements, if CryoLife
fails to meet certain contractual obligations, including the payment of minimum
royalty amounts, such licenses may become nonexclusive or terminable by the
licensor, which could have a material adverse effect on CryoLife's business,
financial condition, results of operations, and cash flows. Additionally,
CryoLife protects its proprietary technologies and processes in part by
confidentiality agreements with its collaborative partners, employees and
consultants. There can be no assurance that these agreements will not be
breached, that CryoLife will have adequate remedies for any breach or that
CryoLife's trade secrets will not otherwise become known or independently
discovered by competitors, any of which could have a material adverse effect on
CryoLife's business, financial condition, results of operations, and cash flows.
UNCERTAINTIES REGARDING FUTURE HEALTH CARE REIMBURSEMENT MAY AFFECT THE AMOUNT
AND TIMING OF REVENUES
Even though CryoLife does not receive payments directly from third-party
health care payors, their reimbursement methods and policies impact demand for
CryoLife's cryopreserved tissue and other services and products. CryoLife's
preservation services with respect to its cardiac, vascular, and orthopaedic
tissues may be particularly susceptible to third-party cost containment
measures. For example, the initial cost of a cryopreserved allograft heart valve
generally exceeds the cost of a mechanical, synthetic or animal-derived valve.
CryoLife is unable to predict what changes will be made in the reimbursement
methods and policies utilized by third-party health care payors or their effect
on CryoLife.
14
Changes in the reimbursement methods and policies utilized by third-party
health care payors, including Medicare, with respect to cryopreserved tissues
provided for implant by CryoLife and other Company services and products, could
have a material adverse effect on CryoLife. Significant uncertainty exists as to
the reimbursement status of newly approved health care products and services and
there can be no assurance that adequate third-party coverage will be available
for CryoLife to maintain price levels sufficient for realization of an
appropriate return on its investment in developing new products.
Government, hospitals, and other third-party payors are increasingly
attempting to contain health care costs by limiting both coverage and the level
of reimbursement for new products approved for marketing by the FDA and by
refusing in some cases to provide any coverage for uses of approved products for
indications for which the FDA has not granted marketing approval. If adequate
coverage and reimbursement levels are not provided by government and other
third-party payors for uses of CryoLife's new products and services, market
acceptance of these products would be adversely affected, which could have a
material adverse effect on CryoLife's business, financial condition, results of
operations and cash flows.
RAPID TECHNOLOGICAL CHANGE COULD CAUSE SERVICES AND PRODUCTS TO BECOME OBSOLETE
The technologies underlying products and services offered by CryoLife and
its competitors are subject to rapid and profound technological change.
Competition intensifies as technical advances in each field are made and become
more widely known. There can be no assurance that others will not develop
products or processes with significant advantages over the products and
processes that CryoLife or a competitor offers or is seeking to develop. Any
such occurrence could have a material adverse effect on the business, financial
condition, results of operations, and cash flows of CryoLife or its competitors.
RISKS RELATED TO CRYOLIFE'S COMMON STOCK
SECURITIES PRICES FOR CRYOLIFE SHARES HAVE BEEN, AND MAY CONTINUE TO BE,
VOLATILE
The trading price of CryoLife's common stock has been subject to wide
fluctuations recently and may continue to be subject to such volatility in the
future. Trading price fluctuations can be caused by a variety of factors,
including regulatory actions such as the FDA Order, recent product liability
claims, variations in operating results, announcement of technological
innovations or new products by CryoLife or its competitors, governmental
regulatory acts, developments with respect to patents or proprietary rights,
general conditions in the medical device or service industries, actions taken by
government regulators, changes in earnings estimates by securities analysts or
other events or factors, many of which are beyond CryoLife's control. If
CryoLife's revenues or operating results in future quarters fall below the
expectations of securities analysts and investors, the price of CryoLife's
common stock would likely decline further, perhaps substantially. Changes in the
trading price of CryoLife's common stock may bear no relation to CryoLife's
actual operational or financial results. If CryoLife's share prices do not meet
the requirements of the New York Stock Exchange, CryoLife's shares may be
delisted. CryoLife's closing stock price in the period January 1, 2002 to March
15, 2004 has ranged from a high of $31.31 to a low of $1.89.
ANTI-TAKEOVER PROVISIONS MAY DISCOURAGE OR MAKE MORE DIFFICULT AN ATTEMPT TO
OBTAIN CONTROL OF CRYOLIFE
CryoLife's Articles of Incorporation and Bylaws contain provisions that may
discourage or make more difficult any attempt by a person or group to obtain
control of CryoLife, including provisions authorizing the issuance of preferred
stock without shareholder approval, restricting the persons who may call a
special meeting of the shareholders and prohibiting shareholders from taking
action by written consent. In addition, CryoLife is subject to certain
provisions of Florida law that may discourage or make more difficult takeover
attempts or acquisitions of substantial amounts of CryoLife's common stock.
Further, pursuant to the terms of a shareholder rights plan adopted in 1995,
each outstanding share of common stock has one attached right. The rights will
cause substantial dilution of the ownership of a person or group that attempts
to acquire CryoLife on terms not approved by the Board of Directors and may have
the effect of deterring hostile takeover attempts.
15
DIVIDENDS ARE NOT LIKELY TO BE PAID IN THE FORESEEABLE FUTURE
CryoLife has not paid, and does not presently intend to pay, cash
dividends. Future credit agreements may contain financial covenants, including
covenants to maintain certain levels of net worth and certain leverage ratios,
which could have the effect of restricting the amount of dividends that CryoLife
may pay. It is not likely that any cash dividends will be paid in the
foreseeable future.
16
FORWARD LOOKING STATEMENTS
This prospectus, and the information incorporated herein by reference,
contains forward-looking statements and information made or provided by us that
are based on the beliefs of our management as well as estimates and assumptions
made by and information currently available to our management. The words
"could," "may," "might," "will," "would," "shall," "should," "pro forma,"
"potential," "pending," "intend," "believe," "expect," "anticipate," "estimate,"
"plan," "future" and other similar expressions generally identify
forward-looking statements, including, in particular, statements regarding
future services, market expansion and pending litigation. These forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned not to place
undue reliance on these forward-looking statements, which are as of their
respective dates. Such forward-looking statements reflect the views of our
management at the time such statements are made and are subject to a number of
risks, uncertainties, estimates and assumptions, including, without limitation,
in addition to those identified in the text surrounding such statements, those
identified under "Risk Factors" and elsewhere in this prospectus.
All statements, other than statements of historical facts, included herein
that address activities, events or developments that the Company expects or
anticipates will or may occur in the future, are forward-looking statements,
including statements regarding:
o the impact of recent accounting pronouncements;
o adequacy of product liability insurance to defend against lawsuits;
o the outcome of lawsuits filed against the Company;
o the impact of the FDA Order and subsequent FDA activity on future
revenues, profits and business operations;
o the effect of the FDA Order and subsequent FDA activity on sales of
BioGlue;
o future tissue procurement levels;
o expected future impact of BioGlue on revenues;
o the impact of the FDA's Form 483 Notices of Observation;
o the estimates of the amounts accrued for the retention levels under
the Company's product liability and directors' and officers' insurance
policies, as well as the estimates of the amounts accrued for product
loss claims incurred but not reported at December 31, 2003;
o future costs of human tissue preservation services;
o changes in liquidity and capital resources;
o the outcome of any evaluation of allograft heart valves by the FDA;
o the Company's competitive position;
o estimated dates relating to the Company's proposed regulatory
submissions;
o the Company's expectations regarding the adequacy of current financing
arrangements;
o product demand and market growth;
17
o the potential of the ACT for use in cancer therapies, fibrinolysis
(blood clot dissolving), and other drug delivery applications;
o the impact on the Company of adverse results of surgery utilizing
tissue processed by it;
o the expected receipt of tax refunds; and
o other statements regarding future plans and strategies, anticipated
events or trends.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions, and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
and developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties which could cause actual results
to differ materially from the Company's expectations, including the risk factors
discussed in this prospectus and other factors, many of which are beyond the
control of CryoLife. Consequently, all of the forward-looking statements made in
this prospectus are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequences to or effects on the Company or its business or
operations. The Company assumes no obligation to update publicly any such
forward-looking statements, whether as a result of new information, future
events, or otherwise.
USE OF PROCEEDS
This prospectus relates to the offer and sale of our common stock by the
shareholders named herein. We will not receive any proceeds from the sale of the
common stock. We will pay all expenses related to the registration of the common
stock except underwriting discounts and commissions and fees and expenses of
counsel for the selling shareholders.
SELLING SHAREHOLDERS
The shareholders named below have contractual rights requiring us to
register the resale of their shares. The following table states the name of each
shareholder who may sell under this prospectus and, for each shareholder, the
number of shares of our common stock beneficially owned as of March 15, 2004,
and the percentage of our stock that number represents; the number of shares
which may be sold using this prospectus; and the number of shares of common
stock that will be beneficially owned after the completion of this offering
(assuming the sale of all shares offered), and the percentage of our common
stock that number represents.
18
BENEFICIAL OWNERSHIP PRIOR BENEFICIAL OWNERSHIP AFTER
TO THE OFFERING NUMBER OF THE OFFERING (1)
----------------------------- SHARES ----------------------------
NAMES OF SHAREHOLDERS SHARES PERCENTAGE OFFERED SHARES PERCENTAGE
------------- ------------ --------------- --------- ---------------
Atlas Equity I, Ltd. (2)..................... 250,000 * 250,000 0 *
BlackRock Funds, Small Cap Growth Equity 600,000 2.6% 600,000 0 *
Portfolio (3) (10).........................
Capital Ventures International (4)........... 500,000 2.2% 500,000 0 *
Deephaven Small Cap Growth Fund LLC (5) (10). 400,000 1.7% 400,000 0 *
MFS Series I Trust on behalf of MFS New
Discovery Fund (NDF) (6) (10).............. 598,300 2.6% 119,500 478,800 2.1%
MFS/Sun Life Series Trust on behalf of New
Discovery Series (NWD) (6) (10)............ 111,000 * 22,000 89,000 *
MFS Variable Insurance Trust on behalf of
MFS New Discovery Series (VND) (6) (10).... 218,100 * 48,500 169,600 *
The Riverview Group LLC (7) (10)............. 160,000 * 160,000 0 *
Smithfield Fiduciary LLC (8 (10)............. 994,800 4.3% 944,000 50,800 *
UBS O'Connor LLC f/b/o O'Connor PIPES
Corporate Master Strategies Ltd. (9)....... 400,000 1.7% 400,000 0 *
________________________
*Less than 1% of the outstanding shares
(1) Assumes that all common stock offered will be sold, that we will not issue
additional shares before the offering is completed, and that the shareholder
will not acquire more shares before completion of the offering.
(2) Balyasny Asset Management, LLC ("Balyasny") is the manager of Atlas Equity
I, Ltd. ("Atlas"). By virtue of its ownership of 100% of the equity interest in
Atlas, Balyasny may be deemed to beneficially own the shares held by Atlas. By
virtue of his majority ownership of the equity interest in Balyasny, which owns
100% of the equity interest in Atlas, Dmitry Balyasny may be deemed to
beneficially own the shares of the Company's Common Stock beneficially owned by
Atlas Fund, LLC. The address for this shareholder is 181 W. Madison, Suite 3600,
Chicago, IL 60602, Attn: Dmitry Balyasny.
(3) BlackRock Funds is a registered investment company. Its investment manger is
BlackRock Advisors, a registered investment adviser. The address for this
shareholder is c/o BlackRock Advisors, Inc., 100 Bellevue Parkway, Wilmington,
DE 19809, Attn: Thomas Downey.
(4) Heights Capital Management, Inc., the authorized agent of Capital Ventures
International ("CVI"), has discretionary authority to vote and dispose of the
shares held by CVI and may be deemed to be the beneficial owner of these shares.
Martin Kobinger, in his capacity as Investment Manager of Heights Capital
Management, Inc., may also be deemed to have investment discretion and voting
power over the shares held by CVI. Mr. Kobinger disclaims any such beneficial
ownership of the shares. The business address for this shareholder is 425
California Street, San Francisco, CA 94104.
(5) Deephaven Small Cap Growth Fund LLC is a private investment fund that is
owned by all of its investors and managed by Deephaven Capital Management LLC.
Deephaven Capital Management LLC, of which Mr. Colin Smith is the Chief
Executive Officer, has voting and investment control over the shares that are
owned by Deephaven Small Cap Growth Fund LLC. The address for this shareholder
is 130 Chesire Lane, Suite 102, Mennetonka, MN 55305, Attn: Jared R. Lewis.
(6) These shareholders have appointed Massachusetts Financial Services Company,
d/b/a MFS Investment Management ("MFS") as their investment adviser. As
investment adviser, MFS has sole voting and investment power over all of the
shares beneficially held by these shareholders. As of March 15, 2004, MFS or a
subsidiary of MFS, as investment adviser and not beneficially, had sole or
shared voting and/or investment power over, in the aggregate, 1,463,010 shares
on behalf of these and other client accounts for which MFS or a subsidiary of
MFS act as investment adviser. The address for all of these shareholders (or the
investment adviser) is c/o Massachusetts Financial Services Company, 500
Boylston Street, Boston, Massachusetts 02116.
19
(7) The sole member of Riverview is Millennium Holding Group, L.P., a Delaware
limited partnership ("Holding"). Millennium Management, LLC, a Delaware limited
liability company ("Millennium Management"), is the general partner of Holding.
Israel A. Englander ("Mr. Englander") is the sole managing member of Millennium
Management. The foregoing should not be construed in and of itself as an
admission by any of Holding, Millennium Management or Mr. Englander as to
beneficial ownership of the shares owned by Riverview. The address for this
shareholder is 666 Fifth Avenue, 8th Floor, New York, NY 10103, Attn: Terry
Feeney.
(8) Highbridge Capital Management, LLC is the trading manager of Smithfield
Fiduciary LLC and consequently has voting control and investment discretion over
securities held by Smithfield. Glenn Dubin and Henry Swieca control Highbridge.
Each of Highbridge, Glenn Dubin and Henry Swieca disclaims beneficial ownership
of the securities held by Smithfield.The address for this shareholder is c/o
Highridge Capital Management LLC, 9 West 57th Street, 27th Floor, New York, NY
10019, Attn: Ari J. Storch/Adam J. Chill.
(9) UBS O'Connor LLC ("UBS") is the investment manager for PIPES Corporate
Strategies Master Ltd (the selling security holder), which is a wholly owned
subsidiary of UBS AG which is traded on NYSE. UBS AG is the managing member of
UBS, and in that capacity directs its operations. The address for this
shareholder is 1 North Wacker Drive, 32nd Floor, Chicago, Illinois 60606, Attn:
Jeff Richmond.
(10 This selling shareholder has represented to CryoLife that, although it is
affiliated with a broker or dealer, the selling shareholder purchased the
securities shown in the ordinary course of business, and at the time of the
purchase of the securities, the selling shareholder had no agreements or
understandings, directly or indirectly, with any person to distribute the
securities.
PLAN OF DISTRIBUTION
The shareholders named herein may offer and sell shares of common stock
offered by this prospectus during the two year period ending on the second
anniversary of the closing of the private placement of our common stock in one
or more of the following transactions:
o on The New York Stock Exchange or any other securities exchange or
quotation service that lists the common stock for trading;
o in the over-the-counter market;
o in transactions other than on such exchanges or in the
over-the-counter market;
o in negotiated transactions;
o through the writing of options, whether such options are listed on an
options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales, swaps, or other derivative shares at a stipulated price
per share;
o pursuant to Rule 144; and
20
o a combination of any such methods of sale.
The selling shareholders may offer and sell the shares using any other
method permitted pursuant to applicable law. The named shareholders may sell
their shares at market prices prevailing at the time of sale, at prices related
to such prevailing market prices, at negotiated prices or at fixed prices. The
transactions listed above may include block transactions. These shareholders
have advised us that they have no arrangements with any underwriters or
broker-dealers relating to the distribution of the shares covered by this
prospectus.
The shareholders may sell their shares directly to purchasers, use
broker-dealers to sell their shares or may sell their shares to broker-dealers
acting as principals. If this happens, broker-dealers may either receive
discounts or commissions from the shareholders, or they may receive commissions
from purchasers of shares for whom they acted as agents, or both. If a
broker-dealer purchases shares as a principal, it may resell the shares for its
own account under this prospectus. We will pay all registration fees and
expenses for the common stock offered by this prospectus.
The shareholders and any underwriter, agent, broker or dealer that
participates in sales of common stock offered by this prospectus may be deemed
"underwriters" within the meaning of Section 2(11) under the Securities Act of
1933 and any discounts, concessions, commissions or fees received by them and
any profit on the resale of the securities sold by them may be considered
underwriting discounts or commissions under the Securities Act. We have agreed
to indemnify the shareholders named herein against certain liabilities arising
under the Securities Act from sales of common stock. Selling shareholders may
agree to indemnify any agent, broker or dealer that participates in sales of
common stock against liabilities arising under the Securities Act from sales of
common stock.
The selling shareholders and any underwriter, agent, broker or dealer that
participates in sales of common stock offered by this prospectus will be subject
to the prospectus delivery requirements of the Securities Act, which may include
delivery through the facilities of The New York Stock Exchange pursuant to Rule
153 under the Securities Act.
The selling shareholders and other persons participating in the sale or
distribution of the securities may be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated under the Exchange Act, including Regulation M. Under Regulation M,
in connection with a distribution of securities effected by or on behalf of the
selling security holder, it is unlawful for such person, or any affiliated
purchaser of such person, directly or indirectly, to bid for, purchase, or
attempt to induce any person to bid for or purchase, a covered security during
the applicable restricted period. These restrictions may affect the
marketability of the securities and the ability of any person or entity to
engage in market-making activities with respect to the securities. Generally,
Regulation M provides an exemption from these restrictions if the CryoLife
common stock has a public float of at least $150 million and an average daily
trading volume of at least $1 million for a 60 consecutive calendar day period
ending within 10 days preceding the determination of the offering price in any
distribution of the shares under this registration statement. However, this
exemption does not apply to any selling shareholder who is deemed to be an
affiliate of CryoLife at the time of the distribution.
In addition, the selling shareholders may from time to time sell short our
common stock and, in such instances, this prospectus may be delivered in
connection with such short sales and the shares of common stock offered under
this prospectus may be used to cover such short sales. Any short sales and
purchases to cover short positions may be subject to the Regulation M
restrictions mentioned above.
Instead of selling common stock under this prospectus, shareholders may
sell common stock in compliance with the provisions of Rule 144 under the
Securities Act, if available.
With respect to a particular offering of the common stock, to the extent
required, an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement of which this prospectus
is a part will be prepared and will set forth the following information:
o the specific shares of common stock to be offered and sold;
o the names of the selling shareholders;
21
o the respective purchase prices and public offering prices and other
material terms of the offering;
o the names of any participating agents, broker-dealers or underwriters;
and
o any applicable commissions, discounts, concessions and other items
constituting compensation from the selling shareholders.
In addition, upon CryoLife being notified by a selling shareholder that a
permitted transferee to which the right to utilize this prospectus, as
determined in accordance with the stock purchase agreements which granted
registration rights to the selling shareholders, has been transferred intends to
sell more than 500 shares, a post effective amendment or supplement to this
prospectus will be filed, as appropriate.
Shareholders who sell shares using this prospectus may also include persons
who obtain common stock from one of the named shareholders as a gift, for no
consideration upon dissolution of a corporation, partnership or limited
liability company, on foreclosure of a pledge or in another private transaction;
provided, however, that if a permitted transferee intends to sell more than 500
shares of such CryoLife common stock, the filing of a supplement to this
prospectus will be required.
22
DESCRIPTION OF CAPITAL STOCK
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue up to 75,000,000 shares of Common Stock,
$.01 par value, and 5,000,000 shares of Preferred Stock, $.01 par value. As of
February 24, 2004, there were 23,227,066 shares of Common Stock outstanding held
by approximately 431 shareholders of record and no shares of Preferred Stock
outstanding.
The following summary is qualified in its entirety by reference to the
Company's Amended and Restated Articles of Incorporation, the Company's Bylaws,
as amended, and the Florida Business Corporation Act (the "FBCA").
COMMON STOCK
Holders of Common Stock are entitled to one vote per share of Common Stock
held of record on all matters to be voted upon by the Company's shareholders
generally. Holders of Common Stock are not entitled to cumulative voting rights.
As a result, the holders of a majority of the shares of Common Stock voting for
the election of directors may elect all of the Company's directors if they
choose to do so, and, in such event, the holders of the remaining shares of
Common Stock will not be able to elect any person or persons to the Board of
Directors. See "Selling Shareholders."
Holders of Common Stock are entitled to receive, on a pro rata basis, such
dividends and distributions, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor, subject to any
preferential dividend right of any issued and outstanding shares of Preferred
Stock. In the event of liquidation, dissolution or winding up of the Company,
after payment of creditors, holders of Common Stock are entitled to share
ratably in all assets, subject to the payment of any liquidation preference of
any issued and outstanding shares of Preferred Stock. The shares of Common Stock
currently outstanding are validly issued, fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors of the Company is empowered, without approval of the
Company's shareholders, to cause shares of Preferred Stock (the "Preferred
Stock") to be issued in one or more series and to fix and determine the relative
rights and preferences of the shares of any such series, subject to the limits
of Florida law. Because the Board of Directors has the power to establish the
preferences and rights of each series, it may afford the holders of any series
of Preferred Stock preferences, powers and rights, voting or otherwise, senior
to the rights of holders of Common Stock. The issuance of Preferred Stock could
have the effect of delaying or preventing a change in control of CryoLife. The
Board of Directors has no present plans to issue any shares of Preferred Stock.
STOCK OPTIONS
As of December 31, 2003, the Company has issued and outstanding options to
purchase an aggregate of 2,523,000 shares of Common Stock (net of forfeitures,
expirations and cancellations) pursuant to its Stock Option Plans, at exercise
prices between $2.20 and $31.99. Of such options, approximately 1,293,000 were
exercisable as of December 31, 2003.
ARTICLES OF INCORPORATION AND BYLAWS
Certain provisions of the Articles of Incorporation and Bylaws of the
Company, which are summarized below, could have the effect of making it more
difficult to change the composition of the Company's Board of Directors or for
any person or entity to acquire control of the Company.
23
SPECIAL MEETINGS
Pursuant to the Company's Articles of Incorporation and Bylaws, special
meetings of the shareholders may be called only by the President or Secretary at
the request in writing of a majority of the Board of Directors then in office or
at the request in writing of shareholders owning not less than 50% of all votes
entitled to be cast at the special meeting.
PROHIBITION OF SHAREHOLDER ACTION WITHOUT MEETING
Under the Company's Articles of Incorporation, the shareholders may not
take action by written consent. Any and all action by the shareholders is
required to be taken at the annual shareholders' meeting or at a special
shareholders' meeting. See "Risk Factors--Anti-Takeover Provisions."
ANTI-TAKEOVER STATUTES
The Company is subject to several anti-takeover provisions of the FBCA that
apply to a public corporation organized under Florida law unless the corporation
has elected to opt out of such provision in its Articles of Incorporation or
(depending on the provision in question) its Bylaws. The Company has not elected
to opt out of these provisions. The Common Stock of the Company is subject to
the "affiliated transaction" and "control-share acquisition" provisions of the
FBCA, which are Sections 607.0901 and 607.0902, respectively. These provisions
provide that, subject to certain exceptions, an "affiliated transaction" must be
approved by the holders of two-thirds of the voting shares other than those
beneficially owned by an "interested shareholder" and that "control shares"
acquired in specified shareholders, excluding holders of shares defined as
"interested shares." These provisions of the FBCA may have the effect of making
it more difficult for any person or group to acquire the Company or substantial
amounts of the Company's Common Stock. See "Risk Factors--Anti-Takeover
Provisions."
ABILITY TO CONSIDER OTHER CONSTITUENCIES
The Directors of the Company are subject to the "general standards for
Directors" provisions set forth in Section 607.0830 of the FBCA. These
provisions provide that, among other things, in discharging his or her duties
and determining what is in the best interests of the Company, a Director may
consider such factors as the Director deems relevant, including the long-term
prospects and interests of the Company and its shareholders, and the social,
economic, legal or other effects of any proposed action on the employees,
suppliers or customers of the Company, the communities in which the Company
operates and the economy in general. Consequently, in connection with any
proposed corporate action, the Board of Directors is empowered to consider
interests of other constituencies in addition to the interests of the Company's
shareholders. Shareholders should be aware that Directors who take into account
these other factors may make decisions which are less beneficial to the
shareholders than if the law did not permit consideration of such other factors.
SHAREHOLDER RIGHTS PLAN
In November 1995, the Board of Directors of the Company established a
rights plan, pursuant to which one preferred share purchase right (a "Right") is
attached to each outstanding share of Common Stock. The description and terms of
the Rights are set forth in a Rights Agreement dated as of November 27, 1995,
between the Company and Chemical Mellon Shareholder Services, the original
"Rights Agent." The agreement was amended effective June 1, 1997, when the
Company's Board appointed American Stock Transfer and Trust Company successor
Rights Agent.
Each Right currently entitles the registered holder, upon a "Distribution
Date" (defined below), to purchase from the Company .0333 of a share of Series A
Junior Participating Preferred Stock, par value $.01 per share (the "Preferred
Stock") for $100.00, subject to adjustment as described below. In addition, if
any person or group of affiliated or associated persons becomes an Acquiring
Person (defined below), each Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter entitle its
holder to receive upon exercise (in lieu of Preferred Stock) a number of shares
of Company Common Stock having a market value of two times the exercise price of
the Right. After accounting for the Company's 1996 and 2000 stock splits, the
exercise price would be $33.33, subject to further adjustment upon certain
events.
24
Currently, each Right is non-exercisable and is evidenced only by the
certificate of Common Stock to which it is attached. The Rights will not be
exercisable and will not be evidenced by separate certificates ("Right
Certificates") until the Distribution Date. Certificates will be issued upon the
"Distribution Date," which will occur on the earlier of:
o 10 days following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired
beneficial ownership of 15% or more of the outstanding Common Stock;
or
o 10 business days following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the consummation
of which would cause the offeror to become an Acquiring Person (except
that the Board of Directors may extend the 10-business-day period
before a person or group becomes an Acquiring Person).
Until the Distribution Date (or earlier redemption or expiration of the Rights),
the Rights are transferable only with the Common Stock. During this period,
newly issued Common Stock certificates contain a legend that evidences the
Right, and transfer of any certificate for Common Stock also constitutes the
transfer of the Rights associated with the Common Stock represented by such
certificate.
Upon the Distribution Date, Right Certificates will be mailed to holders of
record of the Common Stock as of the close of business on the Distribution Date.
From that date, all Rights will be evidenced by Right Certificates and generally
exercisable. The Rights will expire on November 27, 2005 (the "Expiration
Date"), unless the Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company.
The Purchase Price payable and the number of shares of Preferred Stock or
other securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time (to prevent dilution) upon any of the following
events:
o a stock dividend on, or a subdivision, combination or reclassification
of, the Preferred Stock;
o the grant to holders of the Preferred Stock of certain rights or
warrants to subscribe for or purchase Preferred Stock at a price, or
securities convertible into Preferred Stock with a conversion price
less than the then-current market price of the Preferred Stock; or
o upon the distribution to holders of the Preferred Stock of evidences
of indebtedness or assets (excluding regular periodic cash dividends
paid out of earnings or retained earnings or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than
those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price.
The number of outstanding Rights and the number of shares of Preferred
Stock issuable upon exercise of each Right (presently .0333 of a share) are also
subject to adjustment in the event of:
o a stock split of the Common Stock;
o a stock dividend on the Common Stock payable in Common Stock; or
o subdivision, consolidation or combination of the Common Stock.
Such adjustments are made only if the triggering event occurs before the
Distribution Date. Such an adjustment was made following the Company's 1996 and
2000 stock splits. Currently, there is one Right attached to each share of
Common Stock, and each Right entitles its holder, after the Rights become
25
exercisable, to purchase .0333 of a share of Preferred Stock. The exercise price
payable to acquire Common Stock is also subject to adjustment. Currently, each
Right entitles its holder to purchase, after the Rights become exercisable,
$66.66 worth of Common Stock for $33.33.
Shares of Preferred Stock will not be redeemable. The Preferred Stock will
be entitled to a preferential quarterly dividend equal to the greater of $.10
per share and (after adjustment for the stock splits) approximately 3.33 times
the dividend declared per share of Common Stock. In the event of liquidation,
any holders of the Preferred Stock will be entitled to a preferential
liquidation payment equal to the greater of $10.00 per share and approximately
3.33 times the payment made per share of Common Stock. Each share of Preferred
Stock will be entitled to one vote, voting together with the Common Stock. In
the event of any merger, consolidation or other transaction in which Common
Stock is exchanged, Preferred Stock will be entitled to receive approximately
3.33 times the amount received per share of Common Stock.
Based on the terms of the Preferred Stock, including its dividend,
liquidation and voting rights, the value of .0333 of a share of Preferred Stock
(before stock splits or other adjustments) purchasable upon exercise of each
Right should approximate the value of one share of Common Stock.
If the Company is acquired in a merger or other business combination
transaction, or if 50% or more of its consolidated assets or earning power is
sold after a person or group has become an "Acquiring Person," proper provision
will be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive, upon the exercise thereof at the then current
exercise price of the Right, that number of shares of common stock of the
acquiring company which at the time of such transaction will have a market value
of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Stock of the Company, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group which will have
become void), in whole or in part, at an exchange ratio of one share of Common
Stock per Right.
The Company is not obligated to issue fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-tenth of a
Preferred Share). If the Company issues fractional shares of Preferred Stock, it
may issue depositary receipts to represent such fractional shares. The Company
may also provide in lieu of fractional shares an amount of cash based on the
market price of the Preferred Stock on the last trading day prior to the date of
exercise.
At any time prior to the acquisition by a person or group of affiliated or
associated persons of beneficial ownership of 15% or more of the outstanding
Common Stock, the Board of Directors of the Company may redeem the Rights in
whole, but not in part. The "Redemption Price," after adjustment for the
Company's stock splits, is approximately $.00033 per Right, subject to further
adjustment for future stock splits, stock dividends and similar transactions.
The redemption of the Rights may be made effective at such time, on such basis,
and with such conditions as the Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights, with
respect to the Rights, will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain beneficial ownership thresholds described above to not less
than the sum of .001% and the largest percentage of the outstanding Common
Shares then known to the Company to be beneficially owned by any person or group
of affiliated or associated persons, except that from and after such time as any
person or group of affiliated or associated persons becomes an Acquiring Person
no such amendment may adversely affect the interests of the holders of the
Rights. Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
The description of the Rights contained herein is qualified in its entirety
by reference to the Rights Agreement, which is incorporated by reference into
the registration statement of which this Prospectus forms a part.
26
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company. It is located at 40 Wall Street, 46th Floor, New York,
NY 10005, and its telephone number is (718) 921-8200.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy and information
statements and other information with the Securities and Exchange Commission. We
have filed a registration statement on Form S-3 with the SEC to register under
the Securities Act the common stock offered hereby. This prospectus constitutes
a part of that registration statement. As allowed by the SEC's rules, this
prospectus does not contain all the information set forth in the registration
statement, certain parts of which have been omitted in accordance with the rules
and regulations of the SEC. Please refer to the registration statement and
related exhibits and schedules filed therewith for further information with
respect to us and the common stock offered hereby. Although the prospectus
describes the material provisions of documents referenced herein and filed as
exhibits, statements contained herein concerning the provisions of any such
document are not necessarily complete. In each instance, reference is made to
the copy of such document filed as an exhibit to the registration statement or
otherwise filed by us with the SEC and each such statement is qualified in its
entirety by such reference.
The following documents, which we have filed with the SEC (file number
001-13165), are incorporated by reference in and made a part of this prospectus:
o The Registrant's Annual Report on Form 10-K filed with respect to the
Registrant's fiscal year ended December 31, 2003.
o The Registrant's Current Reports on Forms 8-K filed on January 7,
January 26, February 9 and February 26, 2004.
We are also incorporating by reference any future filings we make with the
SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering. We also are incorporating any filings under these
sections filed after the date of the initial filing of this registration
statement and prior to the effectiveness of the registration statement. These
documents will be deemed to be incorporated by reference in this prospectus and
to be a part of it from the date they are filed with the SEC. You may read and
copy any document we file at the SEC's public reference room located at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public from commercial document retrieval
services and at the Web site maintained by the SEC at http://www.sec.gov. This
information is also available without charge upon written or oral request to:
CryoLife, Inc.
Attn: Chief Financial Officer
1655 Roberts Boulevard, NW
Kennesaw, Georgia 30144
(770) 419-3355
You should rely only on the information provided or incorporated by
reference in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different information. We may not
make an offer of the common stock in any state where the offer is not permitted.
The delivery of this prospectus does not, under any circumstances, mean that
there has not been a change in our affairs since the date of this prospectus. It
also does not mean that the information in this prospectus is correct after this
date.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus has
been passed upon for CryoLife by Arnall Golden Gregory LLP, Atlanta, Georgia.
27
EXPERTS
The consolidated financial statements and the related financial statement
schedules as of December 31, 2003 and 2002 and for the years then ended
incorporated in this prospectus by reference from the Annual Report on Form 10-K
of CryoLife, Inc. for the year ended December 31, 2003 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report (which
report expresses an unqualified opinion and includes an explanatory paragraph
relating to the Company's change in its method of accounting for goodwill and
other intangible assets to conform with Statement of Financial Accounting
Standards No. 142), which is incorporated herein by reference and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated statements of income, changes in shareholders' equity, and
cash flows of CryoLife, Inc. for the year ended December 31, 2001 have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report dated March 27, 2002.
We could not obtain, after reasonable efforts, the written consent of
Arthur Andersen LLP to its being named in this Form S-3 as having audited our
financial statements for the year ended December 31, 2001, as required by
Section 7 of the Securities Act. Accordingly, Arthur Andersen LLP may not have
any liability under Section 11 of the Securities Act for false or misleading
statements or omissions contained in this prospectus, including the financial
statements, and any claims against Arthur Andersen LLP related to such false or
misleading statements or omissions may be limited.
28
CRYOLIFE, INC.
3,444,000 SHARES COMMON STOCK
--------------------------------------------------------------------------------
PROSPECTUS
--------------------------------------------------------------------------------
MARCH __, 2004
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All expenses, other than fees and expenses of legal or other advisors to
the selling shareholders, will be paid by CryoLife. Such expenses are as
follows:*
SEC registration fee............................. $ 2,944
NYSE listing fee................................. 40,186
Printing expenses................................ 10,000
Accounting fees and expenses..................... 25,000
Legal fees and expenses.......................... 50,000
Miscellaneous.................................... 11,870
---------------
Total................................... $ 140,000
===============
________________________
*The amounts set forth, except for the filing fees for the SEC and NYSE, are
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is a Florida corporation. The following summary is qualified
in its entirety by reference to the complete text of the Florida Business
Corporation Act (the "FBCA"), the Registrant's Restated Articles of
Incorporation, and the Registrant's Bylaws.
Under Section 607.0850(1) of the FBCA, a corporation may indemnify any of
its directors and officers against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding (including any
appeal thereof) (i) if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and (ii) with respect to any criminal action or proceeding, he or
she had no reasonable cause to believe his or her conduct was unlawful. In
actions brought by or in the right of the corporation, however, Section
607.0850(2) provides that no indemnification shall be made in respect of any
claim, issue or matter as to which the director or officer shall have been
adjudged to be liable unless, and only to the extent that, the court in which
such proceeding was brought, or any other court of competent jurisdiction, shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper.
Article X of the Registrant's Restated Articles of Incorporation and Article VI
of the Registrant's Bylaws require that, if in the judgment of the majority of
the Board of Directors (excluding from such majority any director under
consideration for indemnification) the criteria set forth under Section 607.0850
have been met, then the Registrant shall indemnify its directors and officers
for certain liabilities incurred in the performance of their duties on behalf of
the Registrant to the maximum extent allowed by Section 607.0850 of the FBCA
(formerly Section 607.014 of the Florida General Corporation Act).
The Agreement and Plan of Merger dated March 5, 1997, between Registrant
and Ideas for Medicine, Inc. ("IFM") and certain stockholders of IFM provides
that any investors exercising registration rights pursuant to such agreement
must indemnify the officers and directors signing the registration statement
against any liability arising from statements or omissions made in reliance upon
information furnished by such investors to the Registrant for use in such
registration statement.
The Registrant has purchased insurance to insure (i) the Registrant's
directors and officers against damages from actions and claims incurred in the
course of their duties, and (ii) the Registrant against expenses incurred in
defending lawsuits arising from certain alleged acts of its directors and
officers.
II-1
ITEM 16. EXHIBITS
Exhibit
No. Exhibit
------- -------
3.1 Restated Certificate of Incorporation of the Company, as amended.
(Incorporated by reference to Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003).
3.2 ByLaws of the Company, as amended. (Incorporated by reference to
Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the
quarter year ended March 31, 2003).
3.3 Articles of Amendment to the Articles of Incorporation of CryoLife.
(Incorporated by reference to Exhibit 3.3 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2000).
4.1 Form of Certificate for the Company's Common Stock (Incorporated by
reference to Exhibit 4.1 to the Registrant's Registrant's Registration
Statement on Form S-1 (Commission File No. 33-56388).
4.2 Form of Certificate for the Company's Common Stock (Incorporated by
reference to Exhibit 4.2 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
4.3 Rights Agreement between the Company and Chemical Mellon Shareholder
Services, L.L.C., as Rights Agent, dated as of November 27, 1995.
(Incorporated by reference to Exhibit 10.36 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000).
4.4* First Amendment to Rights Agreement, effective June 1, 1997, executed
by the Company and American Stock Transfer & Trust Company, as
successor Rights Agent.
5* Opinion of Arnall Golden & Gregory, LLP regarding legality
23.1* Consent of Arnall Golden & Gregory, LLP (included as part of Exhibit 5
hereto).
23.2** Consent of Deloitte & Touche LLP
23.3** Notice regarding consent of Arthur Andersen LLP
--------
* Previously filed
** Filed with this Form S-3
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
II-2
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Kennesaw, State of Georgia on March 24, 2004.
CRYOLIFE, INC.
By: /s/ Steven G. Anderson
----------------------------------------
Steven G. Anderson
President, Chief Executive Officer and
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
PRINCIPAL EXECUTIVE, FINANCIAL & ACCOUNTING OFFICERS AND DIRECTORS:
------------------------------------------------------------------
Name Title Date
---- ------ ----
/s/ Steven G. Anderson President, Chief Executive Officer and March 24, 2004
------------------------------------------- Chairman of the Board of Directors
Steven G. Anderson (Principal Executive Officer)
/s/ D. Ashley Lee Vice President of Finance, Treasurer March 24, 2004
------------------------------------------- and Chief Financial Officer (Principal
D. Ashley Lee Financial and Accounting Officer)
* Director March 24, 2004
-------------------------------------------
Thomas F. Ackerman
Director March ___, 2004
-------------------------------------------
Dan Bevevino
* Director March 24, 2004
-------------------------------------------
John M. Cook
Director March ____, 2004
-------------------------------------------
Ronald Charles Elkins, M.D.
* Director March 24, 2004
-------------------------------------------
Virginia C. Lacy
* Director March 24, 2004
-------------------------------------------
Ronald D. McCall
* Director March 24, 2004
-------------------------------------------
Bruce J. Van Dyne, M.D.
*By: /s/ D. Ashley Lee
--------------------------------------
D. Ashley Lee
Attorney in Fact
II-4
EXHIBIT INDEX
Exhibit
No. Exhibit
------- -------
3.1 Restated Certificate of Incorporation of the Company, as amended.
(Incorporated by reference to Exhibit 3.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003).
3.2 ByLaws of the Company, as amended. (Incorporated by reference to
Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q for the
quarter year ended March 31, 2003).
3.3 Articles of Amendment to the Articles of Incorporation of CryoLife.
(Incorporated by reference to Exhibit 3.3 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2000).
4.1 Form of Certificate for the Company's Common Stock (Incorporated by
reference to Exhibit 4.1 to the Registrant's Registrant's Registration
Statement on Form S-1 (Commission File No. 33-56388).
4.2 Form of Certificate for the Company's Common Stock (Incorporated by
reference to Exhibit 4.2 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
4.3 Rights Agreement between the Company and Chemical Mellon Shareholder
Services, L.L.C., as Rights Agent, dated as of November 27, 1995.
(Incorporated by reference to Exhibit 10.36 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000).
4.4* First Amendment to Rights Agreement, effective June 1, 1997, executed
by the Company and American Stock Transfer & Trust Company, as
successor Rights Agent.
5* Opinion of Arnall Golden & Gregory, LLP regarding legality
23.1* Consent of Arnall Golden & Gregory, LLP (included as part of Exhibit 5
hereto).
23.2** Consent of Deloitte & Touche LLP
23.3** Notice regarding consent of Arthur Andersen LLP
--------
* Previously filed
** Filed with this Form S-3